Harrisburg, Dauphin County and the bond insurer that backed bonds issued to pay for the retrofit of the Harrisburg Authority's incinerator received significant fees or insurance premiums to provide guarantees and insurance on the debt the authority took out to pay for the failed project, according to a forensic audit the authority released today on the project.

The guarantors signed off on 2003 and 2007 debt issues even though all evidence showed the facility would not be able to produce enough revenue to pay down the debt that has grown to more than $317 million, according to the report.

Excessive fees were paid for "unnecessarily complex" financial transactions related to the project, the report said.

Former Mayor Stephen R. Reed allowed financial group RBC Dain Rauscher and the Royal Bank of Canada (collectively called RBC) representative James Losty have a primary role in developing the plan to finance the project even though RBC's interests were not aligned with those of the authority, the city or county in many respects, according to the report.

In certain instances, the authority, the city and the county took strained positions on state law pertaining regarding municipal debt financing and other issues to permit the project to proceed, according to proceed.

Reed and his closest advisers, Andrew Giorgione, Daniel Lispi and Losty were deeply involved in the decision making process and each had "close ties" to the mayor, the report said.

There was a lack of an adequate process needed to evaluate whether the firm hired as the prime contractor to retrofit the incinerator, Barlow Projects Inc., had the capability and qualifications to take on the project or whether the retrofit made economic sense, according to the report.

Barlow was unable to secure a performance bond because of its bad financial condition, which should have raised serious questions as to whether the company should have been hired, the report said.

Multiple conflicts of interest existed, the report said, including the following:

-Harrisburg-based Reynolds Construction Management Inc. simultaneously worked as a contractor for the authority and Barlow, the company the authority hired without a performance bond to complete the retrofit. Reynolds was awarded contracts without competitive bids.

-Former authority board member Fred Clark had a conflict of interest stemming from his dual roles as a member of the authority and an employee of Reynolds, the report said. Clark did not resign from the board and the authority awarded contracts to the construction group. Clark did abstain from votes involving Reynolds.

The report is not the result of a full audit due to the authority's financial limitations, but it focused on parts of the incinerator transactions the authority board deemed necessary, authority Executive Director Shannon Williams said.

Law firm Klehr Harrison Harvey Branzburg worked with accounting firm ParenteBeard and financial consultants with Public Resources Advisory Group (PRAG) to produce the report.

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